Mortgages

The economy is brightening as 2014 arrives - but that could signal higher borrowing costs for homebuyers as the Federal Reserve scales back its efforts to lower interest rates and the chance of higher inflation increases. Lenders were offering 30-year fixed-rate mortgages this week at an average of 4.53%, up from 4.48% last week and the highest since September, Freddie Mac said Thursday in its weekly report . The interest rate for a 15-year fixed loan averaged 3.55%, up from 3.52% last week.

WASHINGTON - Federal officials swooped in to rescue mortgage finance giants Fannie Mae and Freddie Mac in 2008 with the largest of all the financial crisis bailouts - a combined $187.5 billion - because they were considered too big to fail. Now, despite bipartisan support to shut them down, Fannie and Freddie may prove to be too profitable to close. Fannie and Freddie play a vital role in the mortgage market by purchasing or guaranteeing more than 6 in 10 new loans. And the housing market's recovery has reversed the finances of the once-private companies, now wards of the U.S. government.

When Michael Shuken recently bought his family's first home, a four-bedroom in Mar Vista, his adjustable-rate mortgage helped them stay on the pricey Westside. For now, his interest-only loan costs him about 35% less per month than a 30-year fixed mortgage, he said. But he'll have a much bigger monthly bill in 10 years, when the loan terms require him to start paying off principal at potentially high rates. "What is going to happen if I can't restructure my loan and extend it?

WASHINGTON - Wells Fargo & Co. said Monday it has agreed to pay $591 million to Fannie Mae to settle disputes over soured mortgages the bank sold to the seized housing finance giant during the subprime housing boom. The agreement covers loans originated by Wells Fargo before 2009 that Fannie Mae was trying to force the bank to buy back. The deal "resolves substantially" all repurchase issues related to those loans, the company said. Wells Fargo will pay $541 million in cash to Fannie Mae, with the rest covered by credits from earlier repurchases.

Mortgage rates rose a bit this week following positive news on home building, with Freddie Mac saying lenders were offering a 30-year fixed-rate loan at an average of 4.47%, up from 4.42% last week. The average for a 15-year fixed was 3.51%, up from 3.43% last week, Freddie Mac reported Thursday. Its survey assumes borrowers have solid credit and income, provide at least 20% down payments or home equity, and pay less than 1% of the loan amount in lender fees and points. Start rates on popular types of adjustable rate loans also were higher, Freddie Mac said.

Major corporations raise capital by selling shares in themselves. So do companies with little or no substance behind them. Even start-ups sometimes "go public" before they really start up. So why can't America's homeowners? They can. In yet another new twist on the age-old concept of shared appreciation, they soon may be able to raise money for a down payment, or build up enough equity to jettison a higher-rate mortgage for a less expensive one, by "selling" shares in their homes.

Daniel A. Bailey Jr. isn't your average homeowner. He hasn't paid his mortgage in more than five years, and has no plans to start now. His stance stems from a bizarre incident that thrust Bailey into the news in 2008, when he suddenly became a public relations liability for embattled home lender Countrywide Financial of Calabasas. Bailey had blanketed Countrywide with emails begging for a mortgage modification. The reply came from none other than Angelo Mozilo, Countrywide's chief executive, who accidentally hit "reply" instead of "forward" on a note meant for colleagues.

The city of Los Angeles has filed a lawsuit against Bank of America, the third banking giant accused of mortgage discrimination in minority communities that in turn led to a wave of foreclosures, reduced property tax revenue and increased costs for city services. The city alleges that Bank of America "engaged in a continuous pattern and practice of mortgage discrimination in Los Angeles since at least 2004" by demanding different terms or conditions on loans that "vulnerable" borrowers could not afford, according to the complaint filed Friday in federal court.

Three of the nation's largest banks are not fully complying with new standards for dealing with mortgage customers that were agreed to as part of a $25-billion settlement of foreclosure abuse allegations, the settlement's monitor said Wednesday. In the first half of the year, Bank of America Corp., failed three of the 29 metrics designed to test compliance with 304 new mortgage servicing standards, according to a report from the Office of Mortgage Settlement Oversight. JPMorgan Chase & Co., and Citigroup Inc. each failed two of the standards.